Trade refers to the exchange of goods and services for money, which can be undertaken within the geographical limits of the countries or beyond the boundaries. The trade which takes place within the geographical boundaries of the country is called domestic business, whereas trade which occurs between two countries internationally, is called international business.
Entities engaged in international business often face more difficulties than the entities which conduct domestic business. Although international business enjoys large customer base as they operate in multiple countries. Here is an article which compiles the important differences between domestic and international business.
Content: Domestic Business Vs International Business
|Basis for Comparison||Domestic Business||International Business|
|Meaning||A business is said to be domestic, when its economic transactions are conducted within the geographical boundaries of the country.||International business is one which is engaged in economic transaction with several countries in the world.|
|Area of operation||Within the country||Whole world|
|Quality standards||Quite low||Very high|
|Deals in||Single currency||Multiple currencies|
|Nature of customers||Homogeneous||Heterogeneous|
|Business research||It can be conducted easily.||It is difficult to conduct research.|
|Mobility of factors of production||Free||Restricted|
Definition of Domestic Business
The business transaction that occurs within the geographical limits of the country is known as domestic business. It is a business entity whose commercial activities are performed within a nation. Alternately known as internal business or sometimes as home trade. The producer and customers of the firm both reside in the country. In a domestic trade, the buyer and seller belong to the same country and so the trade agreement is based on the practices, laws and customs that are followed in the country.
There are many privileges which a domestic business enjoys like low transaction cost, less period between production and sale of goods, low transportation cost, encourages small-scale enterprises, etc.
Definition of International Business
International Business is one whose manufacturing and trade occur beyond the borders of the home country. All the economic activities indulged in cross-border transactions comes under international or external business. It includes all the commercial activities like sales, investment, logistics, etc., in which two or more countries are involved.
The company conducting international business is known as a multinational or transnational company. These companies enjoy a large customer base from different countries, and it does not have to depend on a single country for resources. Further, the international business expands the trade and investment amongst countries.
However, there are several drawbacks which act as a barrier to entry in the international market like tariffs and quota, political, socio-cultural, economic and other factors that affect the international business.
Key Differences Between Domestic and International Business
The most important differences Between domestic and international business are classified as under:
- Domestic Business is defined as the business whose economic transaction is conducted within the geographical limits of the country. International Business refers to a business which is not restricted to a single country, i.e. a business which is engaged in the economic transaction with several countries in the world.
- The area of operation of the domestic business is limited, which is the home country. On the other hand, the area of operation of an international business is vast, i.e. it serves many countries at the same time.
- The quality standards of products and services provided by a domestic business is relatively low. Conversely, the quality standards of international business are very high which are set according to global standards.
- Domestic business deals in the currency of the country in which it operates. On the contrary, the international business deals in the multiple currencies.
- Domestic Business requires comparatively less capital investment as compared to international business.
- Domestic Business has few restrictions, as it is subject to rules, law taxation of a single country. As against this, international business is subject to rules, law taxation, tariff and quotas of many countries and therefore, it has to face many restrictions which are barriers in the international business.
- The nature of customers of a domestic business is more or less same. Unlike, international business wherein the nature of customers of every country it serves is different.
- Business Research can be conducted easily, in domestic business. As against this, in the case of international research, it is difficult to conduct business research as it is expensive and research reliability varies from country to country.
- In domestic business, factors of production are mobile whereas, in international business, the mobility of factors of production are restricted.
Carrying out the activities of international business and its management is far more difficult than conducting a domestic business. Due to changes in political, economic, socio-cultural environment across the nations, most business entities find it difficult to expand their business globally. To become a successful player in the international market firms need to plan their business strategies as per the requirement of the foreign market.